“My grandfather used to say that once in your life you need a doctor, a lawyer, a policeman and a preacher but every day, three times a day, you need a farmer’’ – These are the words of one of the most celebrated global modern day famers, mentor and motivational speakers Brenda Schoepp.
These words were reiterated here in Botswana this week by different stakeholders when the paramount importance of Agriculture was discussed in relation to the 2018/19 Budget proposal which was presented to Parliament on Monday. Commentators have expressed concern in regard the little money allocated to Agriculture by government. This year Agriculture has only been allocated 3% of the overall budget, which is a far cry from the 10% ceiling, which the regional standard.
According to experts and agricultural advocates the lack of adequate budget to the agriculture sector subsequently means no infrastructure development to support the sector, no road networks to connect farm lands with market places, no development of innovative solutions in response to climate challenges facing the sector.
At the First National Bank Botswana(FNBB) Budget Speech Review held at the GICC on Tuesday, just a day after Minister of Finance & Economic Development, Kenneth Matambo delivered the 2018/19 Budget Speech, various speakers made the same call – the money proposed for agriculture is way too little.
The common denominator in various submissions by different speakers centred on the fact that agriculture has demonstrated before (through numerous scientific studies and economic research findings) that the sector is a potential remedy to Botswana’s economic diversification headache.
At independence Agriculture contributed over 30 % to the country‘s Gross Domestic Product (GDP); but today the sector has been relegated to a mere 2 % replaced by the lucrative Diamond & Tourism industries . Pre-Independence Batswana lived out of pastoral and arable farming – today the sector is still the source of livelihood for many ordinary Batswana especially those in the rural settlements. The major concern is that on a national scale Botswana cannot feed her 2 million people. The country still imports over 50 % of almost every food commodity predominately from neighboring South Africa.
Minister Matambo announced a 1.34 billion pula budget proposal for the Ministry of Agriculture in the recurrent budget, this will not bring any significant improvement to the sector that supposedly should be feeding Batswana. This has been referred to as underfunding by Botswana Agricultural Marketing Board (BAMB) head of Agronomy, Lambani Obuseng.
Obuseng expressed his concern in the morning session of the budget review which tackled issues in the sectors of agriculture & energy. He said it was pivotal for the government to review the 3 % expenditure which is not enough to develop and resource agriculture sector.
It emerged at the session that Maputo declaration of the 2003 African Union Summit dictates that member states need to spend at least 10 % of their total budget on Agriculture. “Botswana has not been doing that for years since this agreement, it’s a cause for concern,” observed Obuseng.
The Agronomist also said that Agriculture was a complex sector especially when a country wants to produce on a large scale and promote commercial farming. He said with unfavorable and evolving climate conditions Botswana must move with times and be innovative to realize significant contribution of this sector on the economy.
“Modern day farming technology requires capital and to produce on large scale requires capacity, and that is to say there has to be deliberate spending and will from government side to resource these requisites,” he said. Obuseng further observed that though government has tried with a number of initiatives in the past years to grow the agricultural sector, it continued to decline as a result of certain operational challenges that continue to besiege the sector. Some of these challenges include but not limited to poor soil fertility, dependence on simple manual tools, low adoption levels of agricultural technology and poor infrastructure.
Adding to Obuseng’s views, Clover Botswana General Manager, Mike Joyner observed that the funds allocated to the agriculture sector were inadequate. “This 3 % is against a number of propositions adopted in different regional foras. The SADC strategy on agricultural development submitted that agro-processing was a key sector for development. You cannot develop agro procession with this kind of un-prioritized funding that leaves agriculture with the remains of the budget,” he said.
Renowned Beef mogul, Mr Clive Marshall shared on the challenges facing the beef sector such as low returns for cattle producers and lack of market access. He said for Batswana to venture into beef processing and get in feedlots operation in large numbers funds must be availed by the government.
In the main event of the FNBB Budget Review staged in the evening, just before speakers from different sectors of the economy took the podium to dissect and interact on Budget speech, the FNBB Chief Executive Officer, Steven Bogatsu took the stage and hit hard on what he termed lack of will from Government to develop the agriculture Sector . In his welcome remarks, Bogatsu sent a message to government enclave: “why do we still spend less on agriculture while the sector has proven beyond reasonable doubt to be able to create jobs?”
Bogatsu further said it was irrational to continue spending money on importing agricultural produce year and year out while we can inject funds in developing our own sector and produce food. The FNBB CEO also touched on the beef industry, “why do we still operate Botswana Meat Commission in this model while it was making losses year and year out?”
Bogatsu cited Botswana-De Beers relationship as a benchmark model, “we have a good relationship with multinational corporations like De Beers. Why can’t we adopt the same model for BMC and take the beef industry to the next level?” Government was advised to seriously consider reviewing the budget proposed for agriculture.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.